The boss' pay

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Millions of Euro of salaries with no results. You lead a company to bankruptcy, or almost. Companies such as Alitalia, the Government Railways or Telecom Italia and in return you receive bonuses to your heartís content, stock options and remuneration worthy of a thousand and one nights. Who do you think paid the kingly salaries received by Cimoli, Buora, Catania, Tronchetti, Romiti and Ruggiero? The answer is easy. The minority shareholders, the 12,000 workers dismissed by Alitalia, the 9,000 people retrenched (so far) by Telecom, the taxpayers and the people on unemployment benefits. These managers are the new leeches on the economy, who feed on the blood of the companies and who never go down with the company. They are recycled by the system into other companies. This is the Apex of the Economy. If you follow orders and never rat out, then you will be rewarded. A closed circle where no one ever speaks out, no one ever hears anything, no one ever sees anything and, above all, no one ever names any names.
The unemployed family man returns home, looks at his kids who have no future and then sees those that caused the company to fail appearing on the television, showered with adulation, cosseted and with a million-Euro glint in their eyes. The bisonís hooves are deadly and perhaps it would be better to avoid being in their path next spring.

Text of the interview with the authors of: "La paga dei padroni" (The Bossí pay)."

"According to certain influential institutions, the economic crisis is set to continue for at least the next two years and yet, only one of the many major Italian managers and the most highly paid one in 2007 at that, namely Alessandro Profumo, has said, almost as if making a concession, that he will not be receiving any bonuses in 2008. He states that he may give up any bonuses. His bonus in 2007 amounted to six million Euro, and this on top of his basic pay, which amounted to more than three million Euro. Therefore, we will see Alessandro Profumo when the companyís financial results are published since, even without receiving any bonus, his excellent salary is equivalent to the average of the top one-hundred Italian Managers who enjoyed gross earnings of some four million Euro each in 2007. He is the only one of the whole bunch to have stated that he did not deserve any bonus due to the bankís poor performance in 2007. All the others have remained silent: from Corrado Passera, Managing Director of Intesa SanPaolo and one of the main competitors of Profumoís Unicredit Bank, through to the top managers of the other major banks and industrial companies, for example Pirelli, whose share price has dropped sharply on the stock exchange and whose Managing Director, Negri, is the highest paid of the lot, with earnings of some six million a year. Now the minority shareholders, the public and the customers of these major listed companies that also manage private savings, namely the savings of the masses, those without any say, will be expecting these top managers to act in keeping with the very modest results that their companies have achieved.
These managersí remuneration, as we attempted to explain in our book entitled "La paga dei padroni" and published by Chiarelettere, were stratospheric but were never linked to the achievement of any results, or rather, the financial statements never stipulated to which results their remuneration was in fact linked. What we have indeed noticed during our observation of the situation in recent years is that the remuneration received by the managers has continued to increase unabated, irrespective of the results achieved and, in fact, just a few years ago now, two American scholars working at the heart of global capitalism write a book entitled "Remuneration without results". This example also holds true here by us. There is certainly enough political interference in the running of the State-owned public companies. Just recently we have seen the case of Alitalia, which, although bankrupt, is currently in the process of being taken over by a consortium of private businessmen, leaving the massive burden of the Companyís debt to be carried by the taxpayers and the shareholders, half of whom are private individuals. Yet in 2004, when Berlusconi was at the helm of Government and Tremonti was the Minister of Finance, Berlusconi called in the services of the man he classified at the time as the best manager in the world, namely Giancarlo Cimoli of the Government Railways Company, offering him a remuneration package that was the highest being paid by any of the European airlines, or 2.8 million Euro gross in 2005, a figure that was more than double that paid to its top manager by Lufthansa and more than triple that paid by Air France. However, Alitalia was and still is the airline posting the biggest losses not only in Europe, but worldwide. The remainder of the Italian companies and capitalist system is being managed by private entrepreneurs with little capital but who nevertheless expect to run the companies personally or to do so through their children, rewarded with exorbitant salaries and, in this case, in my opinion, politics is conspicuous by its absence. It doesnít seem to matter that the decisions are being made by a closed system of relationships in which capital poor entrepreneurs, capitalists and bankers pay themselves exceptional salaries even when the profits, which should form the basis for remuneration, at least according to the classical and most proper capital reward systems, are indeed scarce or too inconsistent.
As far as we are concerned, the problem is not so much how to measure the extent of the remuneration paid out, but rather, the problem we have is the following: When he left Fiat after 25 years of service, Cesare Romiti was given a golden handshake of 100 million Euro. This amounts to a payout of four million Euro for each year of service. The question that arises is the following: why did Fiat give all this money to Cesare Romiti in the form of a golden handshake? It was while we were searching for an answer to this question that the real problems and failures of the Italian capitalists system were uncovered, namely that, today, the workers and minority shareholders invariably end up bearing the brunt of the serious effects of the economic crisis. What we would like to know, and what remains to be seen in 2009, is not only whether or not they will be reducing their salaries accordingly in the light of the economic crisis, but also whether or not the managers and entrepreneurs who together run these Italian companies change their behaviour and their management style in any way. In other words, whether they will genuinely work towards mitigating the effects of the crisis and improving the performance of the companies or whether they will instead continue to display the same behaviour that so clearly emerges in our book, namely this typical way of concerning themselves mainly with their personal interests in terms of remuneration, as well as making other profits, instead of ensuring that their companies perform as well as they should. The figures we are dealing with may be huge for the individual managers that receive them but, were they to be divided between all of the companiesí employees, these figures would fade into insignificance and, therefore, the problem is not that if the managers earned less, the company would do better, but rather precisely the opposite. If the companies were better managed, the managers would earn less. Managersí salaries are not the cause of the poor performance by the companies, but rather one of the effects. It is a symptom of poor company management. Abroad, there is a much closer link between cause and effect and those managers who manage the companies and the banks poorly are sent home as a result. We see this on a daily basis in the newspapers. In Italy instead, none of them is being sent home and indeed we read in the newspapers certain statements made by top managers and bankers claiming that the current crisis is not of their doing, but is simply something out of the blue.
Abroad, in recent months and with the advent of the global financial crisis, we have not only seen many captains of industry being sent home, but also many others having to accept cuts in their salaries, so-called bonuses and much vaunted performance rewards. However, in certain other countries such as Germany, the Government has established a ruling that, in the case of companies that receive aid in order to avoid going under, the managers may not earn more than 500 thousand Euro per year (gross) if they are to keep their jobs. This could be a mistake however. While we donít believe it is right to cap earnings by law, it would certainly be opportune to encourage greater moderation and closer links between remuneration and company results. In the USA, where the three major automobile manufacturers of Detroit risk sliding into bankruptcy unless billions of dollars of government aid is forthcoming, the top managers have already cut their basic pay to one dollar, or so they say, and the remainder of their package will only be paid out if the company results warrant such payment. Nothing of the sort has yet occurred in Italy, in the sense that no one has yet made any announcement of this sort, except for Profumo who, as was stated earlier, was obliged to do so as a result of the difficulties currently being experienced by his bank and the risk of being sent home." Gianni Dragoni and Giorgio Meletti

Posted by Beppe Grillo at 04:17 AM in | Comments (5)
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Comments

Government taking the wealth and redistributing it!?
Be serious, this is not fairy tale!
It never happened. Anywhere, anytime. It does not work because government makes its own rules and people are too dumb to vote for honest people.

We are the problem. Not the managers, not the politicians.

Simple example: instead of buying food at the local store, we buy at COOP. We save 5Euro on each grocery. They have thousands of store so they can blackmail suppliers -who have to pay bribe to get their products in store- and receive big government help while paying practically no tax (this is wealth redistribution invoked before). The 5 Euro you are saving cost you 50Euro in taxes plus 50 Euro -government bribe-.

Now take this thought to the financial system, telecom, food industry, construction, insurance, highways, anything.

Unless the society starts to organize outside the conventional institutions, there is no way you get out of this circle.

Good luck Italians!

Posted by: Steve Stones | December 22, 2008 09:12 PM


I too am dismayed by all this corruption, when will it end?

Posted by: Alice Harper | December 21, 2008 06:47 PM


There are two things that always rise to the top: The cream on the milk and the scum on the septic tank.
The milk has all become homogenised so that there is no longer any visible cream, but the scum still sits on the top of the shit in the sewage digester and values itself above all else.
I am simply amazed that it has taken an almost total collapse of the world economy for the average dumb shit to realise that the scum has been feeding off it unjustly for centuries.
Fiscal imperialism is alive and well and it is the serfs who will suffer as a consequence of their masters' venal averice.
That this is so is as much the responsibility of the serf as it is of the master, for without the tacit agreement of the serf, the master cannot rule. There can be no corruption where there is no-one corruptible.
The stench of corruption is everywhere; at all levels of society.
If one's own hands are not meticulously clean, then one has no right to complain.

Posted by: Rolly Wheeler | December 21, 2008 03:28 PM


Of all the European countries that have caught America's contagious disease of excessive salaries, bonuses, stock options and severance benefits, Italy comes out on top. Of course it is unmerited and immoral for top exectives to award themselves millions while employees earnings hardly keep pace with inflation. So long as a privileged elite run the economy on the basis of you scratch my back, I'll scratch yours, there will be no redistribution of the nation's wealth.
Government action is the only solution to spread wealth. I have been raising this matter, as well as the unfair tax regimes,which allow the most wealthy to pay less, through my blog which I invite everyone to read.
www.pfieldman.blogspot.com

Posted by: peterfieldman | December 21, 2008 12:07 PM


Of all the European countries that have caught America's contagious disease of excessive salaries, bonuses, stock options and severance benefits, Italy comes out on top. Of course it is unmerited and immoral for top exectives to award themselves millions while employees earnings hardly keep pace with inflation. So long as a privileged elite run the economy on the basis of you scratch my back, I'll scratch yours, there will be no redistribution of the nation's wealth.
Government action is the only solution to spread wealth. I have been raising this matter, as well as the unfair tax regimes,which allow the most wealthy to pay less, through my blog which I invite everyone to read.
www.pfieldman.blogspot.com

Posted by: peterfieldman | December 21, 2008 12:04 PM


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